So Much For Electing An Outsider

During his run for the presidency, Donald Trump took the occasional break
from insulting women and minorities to toss off some decent - even exciting
- policy ideas. Term limits for congressmen and a ban on politicians becoming
lobbyists, for instance, were straight from the Libertarian good-government
Christmas list.

But best of all was the effective break-up of the big banks through the re-imposition
of Glass-Steagall, a law passed during the Great Depression to separate taxpayer-protected
commercial banks from free-to-fail investment banks.

Here's an article published during the campaign noting Wall Street's angst
at the prospect:

(CNBC) - The GOP candidate's pledge to bring back Glass-Steagall is an unwelcome
surprise for the financial services industry.

A top advisor to presumptive GOP presidential nominee Donald Trump said
on Monday that the party wants to reimplement Glass-Steagall, Depression-era
legislation that was designed to prevent big bank "supermarkets," but which
was repealed in 1999.

After the surprise announcement, which came on the first day of the Republican
National Convention, Wall Street sources sounded off on the idea that a Republican
would reverse course on policies nearly 20 years old and now taken for granted
by big banks.

One lawyer, who works with financial institutions on behalf of a white-shoe
firm in New York, called the idea "scary." Even Wilbur Ross, one of the Trump
campaign's biggest supporters from the finance industry, called it
"surprising." Others on Wall Street who spoke to CNBC used stronger language
that can't be printed.

Glass-Steagall is legislation the U.S. imposed in the wake of the 1929 market
crash aimed at limiting the relationships between securities firms and commercial
banks, and by extension of that, systemic risk to U.S. markets and the economy.
In 1999, legislation was passed that did away with Glass-Steagall, but now,
the GOP is ready to bring it back and break up banks.

(Salon) - Judging by who Trump is considering for Treasury secretary, Wall
Street banks could have unprecedented influence.

Donald Trump may have sounded like an economic populist to his voters during
the presidential campaign, but his administration is shaping up to be the
best thing to happen to Wall Street since the Roaring '20s, that regulation-free
era that preceded the Great Depression. And we know how well that worked
out for the nation.

This might sound like hyperbole, but Politico yesterday quoted an historian
to back it up:

"You would have to go back to the 1920s to see so much Wall Street influence
coming to Washington," said Charles Geisst, a Wall Street historian at Manhattan
College. "It's the most dramatic turnaround one could imagine. That's the
truly astonishing part."

It's a little scary when historians are saying that the major Wall Street
banks had even less power in Washington during our recent period of deregulation,
which spanned the presidencies of Bill Clinton and George W. Bush, than they
probably will have over the upcoming four to eight years of the Orange Reign.

And it is also a remarkable turnaround since Trump spent so much of his
general election campaign bashing Hillary Clinton for her ties to Wall Street.
This came after a bruising Democratic primary in which Bernie Sanders bashed
her for the same reason. Sanders's popularity and Trump's win, the pundits
said, indicated an ascendant populist mood in the country. The fact that,
in Trump's case at least, said populism was a distraction meant to keep his
fans from noticing that he would be restoring all the old Wall Street thieves
and lackwits to prominent positions in Washington was duly noted by liberals
but did not break through to enough voters. Or if it did, they did not care.

Trump, of course, is spinning his economic plans as the responsible way
to unleash the great power of the American economy. From his transition website:

Federal policy should focus on free enterprise, while protecting consumers
by policing markets for force and fraud. Both Wall Street and Washington
should be held accountable.

To hold Wall Street accountable, Trump has been looking to name a Treasury
secretary who will do anything but. JPMorgan CEO Jamie Dimon has been in
the running and according to CNBC he's pitching hard for the gig -- what wolf
wouldn't to get into the sheep pen?

Right now, however, the top contender is said to be another wolf: Seth Mnuchin,
a longtime Goldman Sachs executive and hedge fund manager. Mnuchin was recently
the CEO of a regional bank, OneWest, which was previously known as IndyMac.
The bank was one of the major players in the foreclosure crisis during the
Great Recession and is accused of fraudulently foreclosing on thousands of
homes, particularly those owned by seniors and low-income minorities who
did not have the resources to pursue legal recourse.

Mnuchin, by the way, is not a fan of the Dodd-Frank financial reform act
signed by President Barack Obama, which was intended to rein in some of the
banking practices by which Mnuchin made his fortune. Since one of Trump's
goals for the entire campaign has been the repeal of the Dodd-Frank act and
because the deregulation-happy Republicans who control Congress share that
goal, you can expect that legislation, signed in 2010 in response to the
banking excesses that brought on the Great Recession, to disappear into the
mists of history once Mnuchin is confirmed.

Congressional Republicans are also likely going to use this new business-friendly
atmosphere to destroy or at least hamstring the Consumer Financial Protection
Bureau, the baby of Sen. Elizabeth Warren, who helped set it up in 2010 before
her run for the Senate. Republicans have been gunning for the CFPB, which
helps protect consumers from predatory businesses. According to The Huffington
Post, the CFPB has found redress for 27 million consumers to the tune of
nearly $12 billion in its short history.

The GOP now plans to rein in the CFPB, possibly by naming recently retired
Rep. Randy Neugebauer, R-Texas, to run it. Neugebauer, who like Hensarling
has ties to the payday loan industry, has long opposed the CFPB. So putting
him in charge of it is the proverbial case of the fox guarding the henhouse.

Clearly some back-channel discussions took place in which:

1) Trump made it clear to Wall Street that he was just kidding about Glass-Steagal
and that once elected he'd take care of his banker friends, or...

2) Wall Street made it clear to Trump that the rewards for playing ball would
be as great as the penalties for not playing ball would be terrible.

Either way, message received. The aristocrats seem to have weathered the peasant
revolt just fine and are back to happily fleecing their sheep.

John Rubino edits DollarCollapse.com and has authored or co-authored five
books, including The Money Bubble: What To Do Before It Pops, Clean
Money: Picking Winners in the Green Tech Boom, The Collapse of the Dollar
and How to Profit From It, and How to Profit from the Coming Real Estate
Bust. After earning a Finance MBA from New York University, he spent the
1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst.
During the 1990s he was a featured columnist with TheStreet.com and a frequent
contributor to Individual Investor, Online Investor, and Consumers Digest,
among many other publications. He now writes for CFA Magazine.